Gifts cards are a hot gift item these days. I think part of the reason they have grown in popularity is because it relieves the gift buyer from having to guess what the recipient wants. It’s an easy option that guarantees that the recipient will like what they get, mainly because they get to choose the gift themselves. What a great gift idea; especially if you don’t know the person well.

However, those little gift cards aren’t without their faults.

You would think gift cards can be used just like cash, and for the most part they can. But unlike actual cash, gift cards can lose their monetary amount over time or even immediately in certain situations.

Eric and I found a gift card from the wedding that we forgot to use. Stuck in the depths his wallet was an American Express gift card that was worth $100. But when the cashier ran the card it only had $94 on it.

$6 had magically disappeared in the 15 months we had the card in our possession. How could that be? How could this gift of “cash” devalue?

Fees, starting on the 366th day after the card was purchased for us, ate into the amount of the gift card.

If you don’t spend the entire balance within a year, it can lose a set amount (often $2 or $3 a month) until the balance is $0. They call these penalties “maintenance” or “dormancy” fees. You tend to see them more on “open loop” cards (cards that can be used anywhere that credit card is accepted, like Visa or Mastercard gift cards) but they can also be found on some store-specific gift cards.

Some cards can even expire, meaning you can lose the entire value of the card if you don’t use it by a certain time. Many retailers have dropped their expiration date policies to be more customer-friendly, but not all of them have.

Many states have passed laws preventing gift cards from expiring but it usually only applies to local retailers rather than national chains. I guess if your gift card has an expiration date and you fail to use it in time, that well intentioned gift turns into a donation to that store on your behalf. Lovely.

What if you have gift cards from a company that runs into financial trouble? Unfortunately, they have the potential to become worthless. That is exactly what happened to people holding Sharper Image gift cards recently.

The Sharper Image announced late last month that it was suspending the acceptance of gift cards, at least temporarily. It urged shoppers to check the company Web site later this month for an update. That is typical of businesses that reorganize under Chapter 11 bankruptcy, which treats gift cards as a loan to the company, not as cash.

Refusing to honor gift cards is a public relations nightmare, because people will feel like their money was stolen from them, and rightfully so. Both the buyers and recipients of gift cards are hurt when the cards become worthless pieces of plastic. I can’t imagine any company that refuses to honor gift cards would ever regain consumer confidence, and without a customer base the company has no real future.

According to the article, consumers should never assume that if a company files for bankruptcy but continues to do business that they have to keep taking the gifts cards. That’s scary, especially in our economic climate, where the number of retail bankruptcies this year is expected to reach levels not seen since the 1991 recession.

Overall, I still think gift cards are good gifts as long as everyone is aware of the fine print and potential risks associated with them.

Recommendations for gift card buyers:

Before you purchase a gift card make sure to look at the rules. Will the card lose its value over time or does it expire? Consider buying a gift card directly from a retailer (i.e. Target or Best Buy) as opposed to a card that can be used in multiple stores (like AmEx or mall gift cards) to help avoid potential fees and expiration dates.

Only purchase gift cards from places that you feel confident will be around for a while. If the business appears to be having trouble it might not be there by the time the recipient is ready to redeem the gift. Small retailers (like local salons or restaurants) pose the highest risk to gift card users because they are more vulnerable to bankruptcy in down economies. Stick to the larger, established retailers for the best chance of long term stability and gift card solvency.

Recommendations for gift card recipients:

Use the gift card as soon as possible. Don’t give the card time to lose its value or risk having the company disappear.

Read the back of the card and familiarize yourself with the rules, especially if you don’t want to use the gift card immediately. Know how the card the works so you can avoid any loss of value through fees or expiration dates.

If you have a gift card that belongs to a company that is no longer accepting them, see if their competitors will give you a discount for it. Some stores look at it as a way to bring in customers from their competition and will accept the worthless cards for a discount on their products.

If the store closes its doors, don’t automatically assume that you can’t redeem the gift card. Do they have an online store? Are there still stores open in nearby areas? Failed mom-and-pop businesses are least likely to be able to honor the cards but larger retail stores might still be able to down the line. It never hurts to call and ask.

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The good news is that we may get a little back now that the class action lawsuit has been settled. The lawsuit alleged that the diamond kingpins were being naughty and were up to no good when it came to diamond pricing.

A great big thanks to Punny Money for bringing this to my attention and my father-in-law sending us a reminder about the case today. If you haven’t checked out Punny’s site you are really missing out.

What’s going on?

De Beers, the world’s largest diamond importer, is settling a gigantic class action lawsuit worth $297 million. Part of that settlement will be distributed to consumers that purchased diamonds between 1994 and 2006.

De Beers is charged with violating all sorts of consumer protection laws by monopolizing diamond supplies and price fixing. Why am I not shocked by this?

What does this mean to you, the consumer?

Consumers who purchased any kind of diamond jewelry (even jewelry with diamonds mixed with other gemstones) between January 1994 and March 2006 for personal use can receive a rebate. The rebate amount will be determined based on the quality and quantity of the diamonds and on how many people file claims. The following table shows the maximum refund you could be eligible for:

There is no way to tell how much your refund will be worth until all the claims have been collected and the available funds are divided among those claims.The fine print indicates that they will not issue checks for claims that amount to less than $10. So, if your total claim is less than $165 for mixed stone jewelry or $95 for diamonds only jewelry, don’t even bother filing.

Are you eligible? All persons located in the United States who purchased any diamond or diamond jewelry or other products containing gem diamonds for personal use and not for resale between January 1, 1994 and March 31, 2006.Make sure you have the receipts as well. They don’t require you to send in receipts when you submit the claim but they do reserve the right to ask for them. I bet the larger claims will require receipts before they issue a check. Even if your claim is under $500 I think it’s best to be prepared.

The process was straight forward and simple. Today we put in a claim for my diamond engagement ring bought in late 2005. Eric just realized he made a mistake when filing, though. He labeled it as an engagement ring but then only put in the value of the solitaire diamond. He should have labeled it as a loose diamond since it was bought independently from the setting. We will have to figure out if it is worth contacting them to get it cleared up or not.

I’ve never been involved in a class action lawsuit before. Often they aren’t even worth the paper the notice is printed on. But this one could actually be worth everyone’s time. Make sure to send in your claims if you have them!

Yesterday I was forwarded a video I’ve seen a before and loved. I crack up every time I watch it. Watch the SNL short “Taco Town” below.

(If you are reading the RSS feed, click through to the site to watch the video so the rest of the post makes sense.)

Isn’t that great? “The new pizza-crepe-taco-pancake-chili bag at Taco Town”! I think this came out when Taco Bell started wrapping tacos with multiple layers in order to make them “exciting”. Personally, I like good old fashioned tacos. Sometimes less is definitely more.

This skit reminded me of how we often equate “more” with “better”. Sometimes it’s true, like when I’m getting a bottle of ketchup that has 50% more as a bonus. More miles per gallon, more life per bulb, more …. In these examples more is definitely better for my money.

But sometimes “more” means “complex” and complexity doesn’t always equal better, as you can see with our Taco Town example. This happens a lot with electronics. The item with more options and buttons and functions must be the superior product, right? We get the complicated one thinking it might be more useful than the basic one but then don’t end up using much of the enhanced functionality it has to offer. Having the extras are nice, but seems like such a waste in the end.

Take my dishwasher for instance (I didn’t choose this dishwasher specifically, it came with the house). It has so many options that I’m a little overwhelmed by it. I always end up using the simple “normal wash” cycle. The foreman even had trouble figuring out the thing so we had to break out the manual to test it during the house walk-through. After reading the manual I learned that the dishwasher somehow senses how dirty my plates are and adjusts the wash time to optimize cleaning. I have no idea how it does that but I’m sure my dishes would get just as clean without that fancy “sensing” mode.

Do I really need 20 different washing cycles and 10 additional options on my washer to get my clothes clean? I’ve only used 5 different cycles and 2 extra option choices on the 30 loads I’ve done so far. And the extra cycles were tried out to experiment. I tend to find a few cycles that work well and stick with them. Don’t get me wrong, I love my washer but I’d probably love it just as much even if it didn’t have so many options.

It’s strange, but I feel a little guilty when I don’t use all the complicated features. It’s like I’m not using the machine to its full potential and the extras are wasting away. I know that I’m using the machine for what *I* bought it for but it still bothers me a little to know I paid for features I’ll never use.

Perhaps, when shopping for a product, we should think about what would accomplish the task at hand instead of getting dazzled by the extra cool features we aren’t likely to use very often. Gosh, I know that’s hard to do with all the temptations out there. Do I need complexity or simplicity to get the job done? Do I need my taco to have “15 great flavors” to satisfy my hunger?

There seem to be a lot of big purchases that have to occur when you buy a new home. Many of them are things you don’t necessarily have to worry about with an existing home. We’ve planned for pretty much everything, but it can still be overwhelming to see all that money flowing out after saving it up for over a year.

Our latest battle has been with window coverings. We’ve been shopping around for the different kinds of window blinds that are offered.

We need blinds to keep some of the heat out during the summer months. It can get pretty intolerably hot down here. We also like the blinds for the privacy they give. And they can’t have any strings for tilting or raising because our cats are mischevious. We have learned our lesson with that one.

We’ve worked with three people directly to get quotes, and we’ve done some estimating on our own from catalogs and information from local stores. The last person didn’t work out due to some family problems she has been having, so we’re really stuck with 2 quotes to choose from. We checked some other local places and did our own estimates on how much it might cost there (based on catalog prices), but were never given a formal quote. We feel a little crunched for time because it takes a while to get the blinds into the house once you get the windows measured and the blinds ordered.

With this purchase, we don’t feel we have the time to search for the absolute best deal. I think if we felt we could spend another month getting people in and comparing prices,we might be able to find an even better deal than we have now. The problem has been that nearly everyone wants to come and measure for themselves before they will give a quote. And even if we find a better deal, for a month’s worth of time it had better be a really fantastic deal to justify the waiting.

We decided today to go with the best deal we’ve been able to find so far. Although I think we might find a better price if we shop around a bit more, we’re pretty comfortable with the price, and it’s beaten the others by a significant amount of money. The place was also much more professional, and offered much faster time frames than anyone else to get the blinds in. Faster and cheaper kind of sealed the deal for us.

Now the final decision we have to make is do we pay for it up front in cash, or take advantage of their financing and 1 year no payments and no interest? I really don’t like the idea of going into debt, but I see this more like the credit card arbitrage game. We’ve become very, very disciplined with our spending over the last year and I think we can handle it. We have the cash to pay for them (we anticipated this expense and have been saving for it) but the idea of getting to earn the interest on the purchase for a full year sounds good to me, too. We would put the cash aside and invest it in CDs or money market funds to get as much interest as possible before we have to use it to pay off the purchase.

Does anyone have an opinion on the one year no payments no interest arbitrage deal? I’ve personally never done it, but it sounds like a good deal as long as you remember the date things are due and make sure that you pay it off a little before that deadline to be safe.

PS – If you came looking for Tightwad Wednesday, it’s going to be posted tomorrow. Melissa wants to do some more work on it before it’s ready to go up and she’s busy cooking and preparing for Thanksgiving tomorrow. Check back in the morning for the post!

Refrigerator

OK, so I wanted a Sub-Zero or a Viking but that just wasn’t gonna happen, except maybe in my dreams. Setting aside those champagne wishes we started seriously looking at the GE Profile 25.5 Cu. Ft. French Door Bottom Freezer model. I liked the layout of the fridge (especially the large deli drawer) and the fact that it had separate compressors for each section. The best price I could find was $2295 which was a little pricey for us. It included things we didn’t particularly feel was necessary like water/ice through the door. But the rest of my appliances are GE Profile so the styling and stainless would match if I got this fridge. Again, matching my other appliances was nice but far from critical.

After discovering that Samsung actually made that fridge and that the GE Profile version was only slightly different, we started looking at the Samsung models. We found a fridge with the exact same layout but without the water and ice in the door (it has an icemaker in the freezer). The Samsung 25.8 Cu. Ft. French Door Bottom Mount Freezer was $1594. We decided that the GE labeling/styling and the ice/water in the door were not worth the extra $701 dollars it would take to get them and we went with the cheaper Samsung.

I feel our frugal side triumphed in this purchase. We decided to pass on the features that would have been nice but weren’t requirements. This helped us save a lot of money while still getting a nice stainless steel fridge. The kitchen is so important to me that I’m surprised I was able to pass up the “best” for what simply fit our needs.

Washer/Dryer

Our current washer and dryer still run but we knew we needed to move to larger front-loading models. I have to wash pet beds frequently and the agitator in my current washer makes it very difficult. We wanted to make the jump to front loaders to make my large laundry loads easier.

I went into looking for these appliances with no preconceived notions of what I wanted so I started searching Consumer Reports first. From there I learned what features to look for. Based on the ratings and reviews the LG TROMM Steam washer and dryer seemed like a good set for me. I liked the idea of being able to sanitize cat beds with steam in the wash. The latest model washer runs about $1359 in blue.

I did a bit more investigation and found that the previous version of the TROMM washer was basically the same model except it had a slightly slower max spin speed and it didn’t have the trilingual LCD screen. I didn’t think those things were worth paying the extra money for so I set my sights on the previous version. Now I had to decide color.

I must admit that the shiny red option beckoned to me. It was a sparkly candy apple red and it seemed to make laundry less boring. I was really leaning toward it, despite it costing $200 more. It took Eric to snap me out of the red daze though. Eric said the extra money it would cost to get the red wouldn’t be worth it and after a few weeks those shiny red units would still just be my washer and dryer. He then reminded me that the laundry room was closed off and I would never even see them. I had also read that the cherry color didn’t come with a porcelain top like the white did so that was that. I swallowed my irrational desire for the pretty shiny version and got the previous model in standard white for $1104.99.

As for the dryer we got the matching version in gas. We feel gas is far cheaper than electricity so we want to stick with it even though the gas model is more expensive initially. Also, every appliance we got is Energy Star qualified. That was an important factor. We wanted to make sure everything we purchased was energy efficient and was something that was built to last. Not only is that good for our wallets but it is good for the environment.

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A Penny Closer is for those of us who want to improve how we spend, save, and invest. We want to be able to manage our money so that we can use it to enjoy our lives today while still saving to reach our dreams tomorrow. Read more about us here...